Economics and Politics - a two sided coin

Being a liberal white male living in the heart of the deep south, I’ve had the opportunity to debate a LOT of people about a variety of subjects. The topic of race and tolerance comes up a lot. Social issues are always a hoot! Religion is a BIG one that usually comes into the discussion regardless of the real topic. And then there’s economics. I don’t claim to be an economist, nor do I claim to be an expert on much of anything, but I DO read a lot and I do think I understand the basics about what an economy is and how it works. The subject of economics comes up SO often in fact, I’ve decided it is one of the lynchpins of politics and, the more I think about it, it’s pretty basic to the two major sides of the political spectrum….liberals vs. conservatives.

Now you already know, I’m a liberal, but I’m going to attempt to clarify as fairly as I possibly can, the two basic positions. I’ll try not to let my bias come through, but it probably will, so let me apologize in advance.

CONSERVATIVE economics: Known by a lot of different names, (trickle-down, Reaganomics, supply side economics, Friedman theory, Chicago School economics) is basically simple. An economy flourishes when tax codes, legislation, and governmental policies favor business or corporations. Also known as “free market” economics, it assumes that if government stays out of the way, businesses will be created, and will grow/prosper/die based on the old concept of supply and demand. These folks like low taxes on businesses, free trade agreements, low taxes on capital gains (investment income), and basically any policy that will result in more profits. The idea is of course that these profits will flow (trickle) down to the rest of us.

LIBERAL economics: Known generally as Keynesian Economics, is also basically simple. Liberals tend to believe that free market policies are good, but that the free market needs to be tempered with governmental policies that strengthen the middle class instead of the wealthy. These folks see economic health as a strong middle class and they believe that empowering that large bunch of folks “in the middle” encourages consumerism, allows a wide swath of people to “succeed”, and actually helps business. They tend to like government regulations that temper the “drive for profit” and they also tend to favor higher taxes on wealthy people and corporations. Keynesians think profits should be reasonable but limited and excess profits should be rolled back into the business and into the economy.

OK, I used more words on Liberal economics than I did on Conservative ideas, but otherwise, I think this is a fair description of the two ideas.

NOW, I want to be clear, I DON’T think Conservatives are “evil”, “selfish”, or “mean”. Nor do I think Liberals are interested in stealing from the successful, communism, or total equality in wealth and income. I think both sides are well-intentioned and both sides have good arguments.

The name of my blog however is “southernliberalman” however so sit back now and let me explain why I think Keynesian economics is better (or if you’re a tea party member, you might just want to stop reading now.)

Reaganomics was called that for a reason. Ronald Reagan began “trickle down economics” in 1980. From 1950 until that time tax policies and legislation tended to favor the middle more than the wealthy and big corporations and a chart of wealth by class looked flat. Everyone was doing well, but nobody was “getting rich” at least not exceedingly. Enter Reagan and the chart began to change.

Reagan’s “trickle down policies” were continued under George HW Bush (even though he referred to it as “voodoo economics”), Bill Clinton (a “corporatist democrat”), and George W. Bush. As you can plainly see in the above graph….it worked (somewhat). The rich got MUCH richer…the rest of us not so much. Apparently lower taxes on corporations, more tax loopholes for corporations, lower capital gains taxes (unearned income) DID make those at the top more successful! Wow! Great!! But what about the “trickle down” part, you ask?

NADA….nothing….we got hosed. Income and wealth for the bulk of Americans (the middle class) has stayed stagnant and in most cases, declined. Trickle- down economics also created a “bubble effect” in the stock market by exploding profits, exploding upper bracket wealth, removing regulations and oversight from investment banks, etc. So, in 2008….the bubble POPPED!!!!

So, if you’re still with me, welcome to the US economy, version 2012.1. We are in trouble. Manufacturing plants have been allowed to leave the US and move overseas…to improve profits. Labor Unions have dwindled to near extinction…to improve profits. Capital gains taxes are now being taxed at 15% with nearly ALL of the GOP demanding they be taxed at zero %….to improve profits (and to make them more fun to play with). Tax loopholes so riddle the tax code that corporations pay a lower effective tax rate in the US than in most any other country…to improve profits.

On the other side of the coin of course, families with children are suffering, unemployment is WAY too high and underemployment is MUCH worse. 40% of Americans are living at or below the poverty level. Millions of Americans have no health insurance, and worst of all, the prospects for the future are bleak.

The Conservatives want to continue on the path we’re on. They want to continue to pamper the rich, they want to continue to favor the biggest corporations and they think (for some reason) doing MORE of that is going to change things for the better.

Liberals want to improve the lot of the middle class.

If you think a strong economy means big bankers and investors, rich corporate board members, high stock prices, monopolies, and higher profits….then you’re a conservative. Not “evil” but fiscally conservative.

If you think a strong economy means a strong and vital middle class, high employment rates, high rates of health insurance coverage, LOWER profits perhaps, but higher wages…then you’re a liberal. You know which side I’m on of course.